NEWS RELEASE
| FOR IMMEDIATE RELEASE: | | FOR MORE INFORMATION, CONTACT: |
| January 30, 2014 | | David D. Brown |
| | | (276) 326-9000 |
First Community Bancshares, Inc. Announces Fourth Quarter and Full Year 2013 Results
Bluefield, Virginia – First Community Bancshares, Inc. (NASDAQ: FCBC) (www.fcbinc.com) (the “Company”) today reported net income for the quarter and year ended December 31, 2013, of $5.32 million and $23.31 million, respectively. Net income available to common shareholders totaled $5.07 million, or $0.26 per diluted common share, for the quarter ended December 31, 2013. Net income available to common shareholders totaled $22.29 million, or $1.11 per diluted common share, for the year ended December 31, 2013. Excluding nonrecurring income and expense items, core earnings for the quarter and year ended December 31, 2013, totaled $6.35 million and $24.80 million, respectively.
On January 28, 2014, the Board of Directors declared a quarterly cash dividend to common stockholders of 12 cents ($0.12). The current year marks the 29th consecutive year of cash dividends paid to stockholders. The dividend is payable on February 21, 2014, to shareholders of record on February 7, 2014.
Fourth Quarter 2013 Highlights –
| · | The non-covered loan portfolio increased $25.77 million compared to the third quarter of 2013 and $41.49 million compared to year end 2012. The increase is primarily attributed to new commercial real estate volume in West Virginia, Central North Carolina, and Eastern Virginia. This marks the third consecutive quarter non-covered loan growth has exceeded covered loan declines. |
| · | Annualized non-covered loan growth was 6.67% during the fourth quarter. |
| · | Non-covered nonaccrual loans totaled $19.16 million as of December 31, 2013, compared to $23.93 million as of December 31, 2012, which is the lowest level reported since the first quarter of 2011. |
| · | Non-covered nonperforming loans as a percentage of total non-covered loans decreased 66 basis points to 1.31% compared with year end 2012, which is the lowest level reported since the third quarter of 2009. Non-covered nonperforming loans continue to decrease as a result of successful resolution efforts. |
| · | The Company incurred expenses of $1.52 million related to the closure/consolidation of seven branches, which are expected to occur during the first half of 2014 and estimated to realize pre-tax annualized net cost savings of over $900 thousand. |
| · | The Company repurchased 1,404,409 shares during the fourth quarter of 2013 bringing the total number of shares repurchased in 2013 to 1,739,601. The Company continued to repurchase shares in 2014, with 117,500 shares repurchased for $1.92 million through January 29, 2014. |
Net Interest Income
Net interest income decreased $3.04 million, or 11.65%, to $23.09 million for the fourth quarter of 2013 compared with the same quarter of 2012. The tax equivalent net interest margin decreased 34 basis points to 4.15% for the fourth quarter of 2013 compared with 4.49% for the same quarter of 2012. Total interest income decreased $3.89 million, or 12.45%, to $27.36 million for the fourth quarter of 2013 compared with the same quarter of 2012. The tax equivalent yield on loans decreased 83 basis points to 5.60% and the average loan balance decreased $39.79 million, or 2.28%, to $1.71 billion for the fourth quarter of 2013 compared with the same quarter of 2012.
Loan interest accretion stemming from the Peoples and Waccamaw acquisitions totaled $4.39 million for the fourth quarter of 2013 compared to $8.16 million for the same quarter of 2012. During the fourth quarter of 2013, approximately $1.80 million of the loan interest accretion from the Peoples and Waccamaw portfolios was received in cash. The normalized net interest margin for the fourth quarters of 2013 and 2012, which excludes non-cash loan interest accretion, was 3.70% and 3.46%, respectively. The normalized yield on loans for the fourth quarters of 2013 and 2012 was 5.00% and 5.03%, respectively.
Total interest expense decreased $848 thousand, or 16.56%, to $4.27 million for the fourth quarter of 2013 compared with the same quarter of 2012. Deposit costs decreased $573 thousand, or 22.00%, to $2.03 million for the fourth quarter of 2013 compared with the same quarter of 2012, reflecting an 11 basis point decrease in the average rate paid on interest-bearing deposits. Borrowing costs decreased $275 thousand, or 10.93%, to $2.24 million for the fourth quarter of 2013 compared with the same quarter of 2012. The average rate paid on interest-bearing liabilities decreased 12 basis points to 0.89% for the fourth quarter of 2013 compared with the same quarter of 2012. The average balance of interest-bearing liabilities decreased $103.56 million, or 5.14%, to $1.91 billion for the fourth quarter of 2013 compared with the same quarter of 2012, which included a $74.57 million decrease in average interest-bearing deposits and a $28.99 million decrease in average total borrowings.
Noninterest Income
Noninterest income decreased $1.94 million, or 21.08%, to $7.27 million for the fourth quarter of 2013 compared with the same quarter of 2012, which is largely due to a $320 thousand net impairment loss related to securities and a $1.63 million increase in the net amortization of the FDIC indemnification asset as a result of improved loss estimates. Wealth management revenues decreased $130 thousand, or 15.08%, for the fourth quarter of 2013 compared with the same quarter of 2012. The Trust and Wealth Management Divisions reported $706 million in combined assets under management as of December 31, 2013. Service charges on deposit accounts decreased $333 thousand, or 8.70%, while other service charges and fees increased $113 thousand, or 6.72%, for the fourth quarter of 2013 compared with the same quarter of 2012. Insurance commissions increased $185 thousand, or 15.23%, to $1.40 million for the fourth quarter of 2013 compared with the same quarter of 2012. The Company realized a $208 thousand net gain on sale of securities for the fourth quarter of 2013, which was a slight decrease compared to the same quarter of 2012. Amortization expense relating to the FDIC indemnification asset totaled $1.31 million during the fourth quarter of 2013, compared to accretion income of $327 thousand for the same quarter of 2012. Other operating income increased $182 thousand, or 16.73%, for the fourth quarter of 2013 compared with the same quarter of 2012. The Company incurred other-than-temporary impairment charges of $320 thousand during the fourth quarter of 2013 related to a non-Agency mortgage-backed security.
Noninterest Expense
Noninterest expense experienced a decrease of $658 thousand, or 3.03%, to $21.08 million for the fourth quarter of 2013 compared with the same quarter of 2012. Salaries and employee benefits decreased $608 thousand, or 5.69%, to $10.09 million for the fourth quarter of 2013 compared with the same quarter of 2012. Salaries and employee benefits attributed to the Peoples and Waccamaw branches decreased $559 thousand to $1.33 million for the fourth quarter of 2013 compared with the same quarter of 2012, which was largely due to a $296 thousand decrease in employee salaries and a $176 thousand decrease in employee benefits, primarily medical insurance, coupled with a reduction of 6 full-time equivalent employees. Occupancy, furniture, and equipment expense decreased $624 thousand, or 18.67%, to $2.72 million for the fourth quarter of 2013 compared with the same quarter of 2012. Other operating expense increased $1.52 million, or 24.31%, to $7.77 million for the fourth quarter of 2013 compared with the same quarter of 2012. Other operating expense included a net loss on sales and expenses associated with other real estate owned of $970 thousand for the fourth quarter of 2013 compared to $312 thousand for the same quarter of 2012. The Company incurred $1.52 million in charges related to seven scheduled branch closures/consolidations that are slated to occur during the first half of 2014. The Company anticipates those branch closures/consolidations to result in pre-tax annualized net cost savings of over $900 thousand. The efficiency ratio for the fourth quarter of 2013 was 58.84% compared to 57.43% for the fourth quarter of 2012.
Allowance for Loan Losses and Asset Quality
The allowance for loan losses was reduced to $24.08 million as of December 31, 2013, compared with $25.77 million as of December 31, 2012. As of December 31, 2013, $22.82 million of the allowance was attributed to the legacy portfolio while $183 thousand and $1.07 million were attributed to the acquired Peoples and Waccamaw portfolios, respectively. Non-covered loans and other real estate owned are those assets not covered by loss share agreements between the FDIC and the Bank in relation to the acquisition of Waccamaw. The allowance for loan losses as a percentage of non-covered loans was 1.54% as of December 31, 2013, compared with 1.70% as of December 31, 2012. Activity in the allowance in the fourth quarter of 2013 included a $308 thousand, or 25.25%, increase in the provision for loan losses charged to operations compared with the same period of the prior year. Activity in the fourth quarter also included a net recovery of previous impairments recorded through the FDIC indemnification asset of $361 thousand as a result of better than expected performance in the Waccamaw purchased credit impaired loan portfolio. There was no provision related to purchased credit impaired loans prior to 2013. Net charge-offs increased $470 thousand, or 36.58%, in the fourth quarter of 2013 compared with the same quarter of 2012. Annualized net charge-offs were 0.45% for the fourth quarter of 2013, which represents an increase of 11 basis points compared with 0.34% for the fourth quarter of 2012. Two loan relationships accounted for 25.68% of annual net charge-offs of $10.35 million in 2013.
Asset quality in the non-covered portfolio continues to improve, as non-covered delinquent loans, which are comprised of loans 30 days or more past due and nonaccrual loans, as a percentage of total non-covered loans decreased to 1.98% as of December 31, 2013, compared to 2.57% for the same period of the prior year. Non-covered nonaccrual loans totaled $19.16 million as of December 31, 2013, compared to $23.93 million as of December 31, 2012, which is the lowest level reported since the first quarter of 2011. At quarter end, the Company’s non-covered nonperforming loans as a percentage of total non-covered loans were 1.31% and non-covered nonperforming assets as a percentage of total non-covered assets were 1.14%.
Total nonperforming assets, including covered and non-covered loan portfolios, consisted of $22.51 million in nonaccrual loans, $86 thousand in accruing loans past due 90 days or more, $1.31 million in unseasoned, accruing troubled debt restructurings, and $14.86 million in other real estate owned as of December 31, 2013. In comparison, total nonperforming assets consisted of $28.25 million in nonaccrual loans, $6.01 million in unseasoned, accruing troubled debt restructurings, and $9.00 million in other real estate owned as of December 31, 2012. In addition, total non-covered nonperforming assets decreased $7.90 million, or 22.13%, and total covered nonperforming assets decreased $4.50 million, or 10.39%, as of December 31, 2013, compared to December 31, 2012.
Balance Sheet and Capital
Consolidated assets totaled $2.60 billion as of December 31, 2013, a decrease of $126.35 million, or 4.63%, compared with $2.73 billion as of December 31, 2012. Consolidated liabilities totaled $2.27 billion as of December 31, 2013, a decrease of $98.64 million, or 4.16%, compared with $2.37 billion as of December 31, 2012. Total stockholders’ equity decreased to $328.61 million as of December 31, 2013, compared with $356.32 million as of December 31, 2012. Book value per as-converted common share increased to $16.79 as of December 31, 2013, compared with $16.76 as of December 31, 2012. Tangible book value per common share decreased to $11.26 as of December 31, 2013, compared with $11.66 as of December 31, 2012. Additionally, the Company repurchased 1,404,409 common shares for $23.21 million and paid a cash dividend of $0.12 per common share during the fourth quarter of 2013.
The Company significantly exceeds regulatory “well capitalized” targets as of December 31, 2013, with a total risk-based capital ratio of 16.44%, a Tier 1 risk-based capital ratio of 15.19%, and a Tier 1 leverage ratio of 9.95%.
Non-GAAP Financial Measures
The Company prepares its financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”). This press release also refers to certain non-GAAP financial measures that the Company believes provide investors with important information, when used in conjunction with results presented in accordance with GAAP, regarding our operational performance.
Core earnings are a non-GAAP financial measure that excludes certain items from net income. Excluded items include gains, losses, and impairment losses on securities; goodwill and intangible impairment; amortization of intangibles; taxes; and other nonrecurring income and expense items. Management believes that core earnings provide the Company and investors a valuable tool to evaluate the Company’s financial results.
The efficiency ratio is a non-GAAP financial measure that is computed by dividing adjusted noninterest expense by the sum of tax equivalent net interest income and adjusted noninterest income. Management believes this measure provides investors with important information about the Company’s operating expense control and efficiency of operations. Management also believes this ratio focuses attention on the core operating performance of the Company over time and is highly useful in comparing period-to-period operating performance of core business operations. The efficiency ratio used by the Company may not be comparable to efficiency ratios reported by other financial institutions.
Tangible book value per common share is a non-GAAP financial measure that is defined as stockholders’ equity less goodwill and other intangibles, divided by as-converted common shares outstanding. Average tangible common equity is a non-GAAP financial measure that is defined as average stockholders’ equity less average goodwill, other intangibles, and the preferred liquidation preference.
About First Community Bancshares, Inc.
First Community Bancshares, Inc., headquartered in Bluefield, Virginia, is a $2.60 billion financial holding company and the parent company of First Community Bank. First Community Bank operates seventy-one banking locations throughout Virginia, West Virginia, North Carolina, South Carolina, and Tennessee. First Community Bank offers wealth management and investment services through its Trust Division and First Community Wealth Management, a registered investment advisory firm. The Trust Division and First Community Wealth Management managed assets with a combined market value of $706 million as of December 31, 2013. The Company is also the parent company of Greenpoint Insurance Group, Inc., a full-service insurance agency headquartered in High Point, North Carolina, that operates nine insurance locations throughout Virginia, West Virginia, and North Carolina. The Company’s common stock is traded on the NASDAQ Global Select Market under the symbol, “FCBC.” Additional investor information can be found on the Company’s website at www.fcbinc.com.
This news release may include forward-looking statements. These forward-looking statements are based on current expectations that involve risks, uncertainties, and assumptions. Should one or more of these risks or uncertainties materialize or should underlying assumptions prove incorrect, actual results may differ materially. These risks include: changes in business or other market conditions; the timely development, production and acceptance of new products and services; the challenge of managing asset/liability levels; the management of credit risk and interest rate risk; the difficulty of keeping expense growth at modest levels while increasing revenues; and other risks detailed from time to time in the Company’s Securities and Exchange Commission reports including, but not limited to, the Annual Report on Form 10-K for the most recent year ended. Pursuant to the Private Securities Litigation Reform Act of 1995, the Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made.
FIRST COMMUNITY BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
| | | Three Months Ended | | | Year Ended | |
| | | December 31, | | | December 31, | |
| (Amounts in thousands, except share and per share data) | | 2013 | | | 2012 | | | 2013 | | | 2012 | |
| Interest income | | | | | | | | | | | | | | | | |
| Interest and fees on loans held for investment | | $ | 24,053 | | | $ | 28,188 | | | $ | 96,600 | | | $ | 96,684 | |
| Interest on securities -- taxable | | | 2,121 | | | | 1,770 | | | | 7,875 | | | | 7,830 | |
| Interest on securities -- nontaxable | | | 1,159 | | | | 1,216 | | | | 4,790 | | | | 4,883 | |
| Interest on deposits in banks | | | 31 | | | | 82 | | | | 211 | | | | 259 | |
| Total interest income | | | 27,364 | | | | 31,256 | | | | 109,476 | | | | 109,656 | |
| Interest expense | | | | | | | | | | | | | | | | |
| Interest on deposits | | | 2,031 | | | | 2,604 | | | | 8,823 | | | | 9,972 | |
| Interest on short-term borrowings | | | 536 | | | | 656 | | | | 2,222 | | | | 2,515 | |
| Interest on long-term borrowings | | | 1,705 | | | | 1,860 | | | | 6,789 | | | | 7,113 | |
| Total interest expense | | | 4,272 | | | | 5,120 | | | | 17,834 | | | | 19,600 | |
| Net interest income | | | 23,092 | | | | 26,136 | | | | 91,642 | | | | 90,056 | |
| Provision for loan losses | | | 1,528 | | | | 1,220 | | | | 8,208 | | | | 5,678 | |
| Net interest income after provision for loan losses | | | 21,564 | | | | 24,916 | | | | 83,434 | | | | 84,378 | |
| Noninterest income | | | | | | | | | | | | | | | | |
| Wealth management income | | | 732 | | | | 862 | | | | 3,412 | | | | 3,701 | |
| Service charges on deposit accounts | | | 3,493 | | | | 3,826 | | | | 13,558 | | | | 14,063 | |
| Other service charges and fees | | | 1,795 | | | | 1,682 | | | | 7,151 | | | | 6,462 | |
| Insurance commissions | | | 1,400 | | | | 1,215 | | | | 5,933 | | | | 5,743 | |
| Net impairment losses recognized in earnings | | | (320 | ) | | | - | | | | (320 | ) | | | (942 | ) |
| Net gain on sale of securities | | | 208 | | | | 213 | | | | 399 | | | | 483 | |
| Net FDIC indemnification asset (amortization) accretion | | | (1,307 | ) | | | 327 | | | | (5,597 | ) | | | 458 | |
| Other operating income | | | 1,270 | | | | 1,088 | | | | 5,555 | | | | 6,742 | |
| Total noninterest income | | | 7,271 | | | | 9,213 | | | | 30,091 | | | | 36,710 | |
| Noninterest expense | | | | | | | | | | | | | | | | |
| Salaries and employee benefits | | | 10,085 | | | | 10,693 | | | | 41,235 | | | | 38,667 | |
| Occupancy expense of bank premises | | | 1,683 | | | | 1,938 | | | | 7,033 | | | | 6,872 | |
| Furniture and equipment | | | 1,035 | | | | 1,404 | | | | 4,966 | | | | 4,145 | |
| Amortization of intangible assets | | | 184 | | | | 191 | | | | 729 | | | | 804 | |
| FDIC premiums and assessments | | | 316 | | | | 389 | | | | 1,717 | | | | 1,612 | |
| Merger related expense | | | - | | | | 866 | | | | 56 | | | | 5,093 | |
| Other operating expense | | | 7,772 | | | | 6,252 | | | | 23,569 | | | | 21,190 | |
| Total noninterest expense | | | 21,075 | | | | 21,733 | | | | 79,305 | | | | 78,383 | |
| Income before income taxes | | | 7,760 | | | | 12,396 | | | | 34,220 | | | | 42,705 | |
| Income tax expense | | | 2,436 | | | | 3,957 | | | | 10,908 | | | | 14,128 | |
| Net income | | | 5,324 | | | | 8,439 | | | | 23,312 | | | | 28,577 | |
| Dividends on preferred stock | | | 252 | | | | 272 | | | | 1,024 | | | | 1,058 | |
| Net income available to common shareholders | | $ | 5,072 | | | $ | 8,167 | | | $ | 22,288 | | | $ | 27,519 | |
| | | | | | | | | | | | | | | | | |
| Basic earnings per common share | | $ | 0.27 | | | $ | 0.41 | | | $ | 1.13 | | | $ | 1.44 | |
| Diluted earnings per common share | | | 0.26 | | | | 0.40 | | | | 1.11 | | | | 1.40 | |
| Cash dividends per common share | | | 0.12 | | | | 0.11 | | | | 0.48 | | | | 0.43 | |
| | | | | | | | | | | | | | | | | |
| Weighted average basic shares outstanding | | | 19,136,317 | | | | 20,063,873 | | | | 19,792,099 | | | | 19,127,065 | |
| Weighted average diluted shares outstanding | | | 20,233,737 | | | | 21,314,023 | | | | 20,961,800 | | | | 20,419,569 | |
| | | | | | | | | | | | | | | | | |
| Return on average assets | | | 0.77 | % | | | 1.19 | % | | | 0.84 | % | | | 1.10 | % |
| Return on average common equity | | | 6.14 | % | | | 9.59 | % | | | 6.57 | % | | | 8.70 | % |
FIRST COMMUNITY BANCSHARES, INC.
CONDENSED QUARTERLY STATEMENTS OF INCOME (Unaudited)
| | | Quarter Ended | |
| | | December 31, | | | September 30, | | | June 30, | | | March 31, | | | December 31, | |
| (Amounts in thousands, except share and per share data) | | 2013 | | | 2013 | | | 2013 | | | 2013 | | | 2012 | |
| Interest Income | | | | | | | | | | | | | | | | | | | | |
| Interest and fees on loans held for investment | | $ | 24,053 | | | $ | 23,439 | | | $ | 24,264 | | | $ | 24,844 | | | $ | 28,188 | |
| Interest on securities -- taxable | | | 2,121 | | | | 1,999 | | | | 1,869 | | | | 1,886 | | | | 1,770 | |
| Interest on securities -- nontaxable | | | 1,159 | | | | 1,216 | | | | 1,207 | | | | 1,208 | | | | 1,216 | |
| Interest on deposits in banks | | | 31 | | | | 42 | | | | 72 | | | | 66 | | | | 82 | |
| Total interest income | | | 27,364 | | | | 26,696 | | | | 27,412 | | | | 28,004 | | | | 31,256 | |
| Interest Expense | | | | | | | | | | | | | | | | | | | | |
| Interest on deposits | | | 2,031 | | | | 2,147 | | | | 2,283 | | | | 2,362 | | | | 2,604 | |
| Interest on short-term borrowings | | | 536 | | | | 517 | | | | 579 | | | | 590 | | | | 656 | |
| Interest on long-term borrowings | | | 1,705 | | | | 1,706 | | | | 1,688 | | | | 1,690 | | | | 1,860 | |
| Total interest expense | | | 4,272 | | | | 4,370 | | | | 4,550 | | | | 4,642 | | | | 5,120 | |
| Net interest income | | | 23,092 | | | | 22,326 | | | | 22,862 | | | | 23,362 | | | | 26,136 | |
| Provision for loan losses | | | 1,528 | | | | 2,333 | | | | 3,205 | | | | 1,142 | | | | 1,220 | |
| Net interest income after provision for loan losses | | | 21,564 | | | | 19,993 | | | | 19,657 | | | | 22,220 | | | | 24,916 | |
| Noninterest Income | | | | | | | | | | | | | | | | | | | | |
| Wealth management income | | | 732 | | | | 863 | | | | 971 | | | | 846 | | | | 862 | |
| Service charges on deposit accounts | | | 3,493 | | | | 3,582 | | | | 3,315 | | | | 3,168 | | | | 3,826 | |
| Other service charges and fees | | | 1,795 | | | | 1,777 | | | | 1,793 | | | | 1,786 | | | | 1,682 | |
| Insurance commissions | | | 1,400 | | | | 1,559 | | | | 1,308 | | | | 1,666 | | | | 1,215 | |
| Net impairment losses recognized in earnings | | | (320 | ) | | | - | | | | - | | | | - | | | | - | |
| Net gain (loss) on sale of securities | | | 208 | | | | (39 | ) | | | 113 | | | | 117 | | | | 213 | |
| Net FDIC indemnification asset (amortization) accretion | | | (1,307 | ) | | | (1,089 | ) | | | (1,662 | ) | | | (1,539 | ) | | | 327 | |
| Other operating income | | | 1,270 | | | | 1,458 | | | | 1,010 | | | | 1,817 | | | | 1,088 | |
| Total noninterest income | | | 7,271 | | | | 8,111 | | | | 6,848 | | | | 7,861 | | | | 9,213 | |
| Noninterest Expense | | | | | | | | | | | | | | | | | | | | |
| Salaries and employee benefits | | | 10,085 | | | | 11,080 | | | | 9,960 | | | | 10,110 | | | | 10,693 | |
| Occupancy expense of bank premises | | | 1,683 | | | | 1,700 | | | | 1,795 | | | | 1,855 | | | | 1,938 | |
| Furniture and equipment | | | 1,035 | | | | 1,288 | | | | 1,300 | | | | 1,343 | | | | 1,404 | |
| Amortization of intangible assets | | | 184 | | | | 183 | | | | 183 | | | | 179 | | | | 191 | |
| FDIC premiums and assessments | | | 316 | | | | 460 | | | | 469 | | | | 472 | | | | 389 | |
| Merger related expense | | | - | | | | - | | | | 7 | | | | 49 | | | | 866 | |
| Other operating expense | | | 7,772 | | | | 5,442 | | | | 4,819 | | | | 5,536 | | | | 6,252 | |
| Total noninterest expense | | | 21,075 | | | | 20,153 | | | | 18,533 | | | | 19,544 | | | | 21,733 | |
| Income before income taxes | | | 7,760 | | | | 7,951 | | | | 7,972 | | | | 10,537 | | | | 12,396 | |
| Income tax expense | | | 2,436 | | | | 2,539 | | | | 2,537 | | | | 3,396 | | | | 3,957 | |
| Net income | | | 5,324 | | | | 5,412 | | | | 5,435 | | | | 7,141 | | | | 8,439 | |
| Dividends on preferred stock | | | 252 | | | | 261 | | | | 253 | | | | 258 | | | | 272 | |
| Net income available to common shareholders | | $ | 5,072 | | | $ | 5,151 | | | $ | 5,182 | | | $ | 6,883 | | | $ | 8,167 | |
| | | | | | | | | | | | | | | | | | | | | |
| Basic earnings per common share | | $ | 0.27 | | | $ | 0.26 | | | $ | 0.26 | | | $ | 0.34 | | | $ | 0.41 | |
| Diluted earnings per common share | | | 0.26 | | | | 0.26 | | | | 0.26 | | | | 0.34 | | | | 0.40 | |
| Cash dividends per common share | | | 0.12 | | | | 0.12 | | | | 0.12 | | | | 0.12 | | | | 0.11 | |
| | | | | | | | | | | | | | | | | | | | | |
| Weighted average basic shares outstanding | | | 19,136,317 | | | | 20,008,861 | | | | 19,997,991 | | | | 20,032,694 | | | | 20,063,873 | |
| Weighted average diluted shares outstanding | | | 20,233,737 | | | | 21,123,788 | | | | 21,205,078 | | | | 21,258,490 | | | | 21,314,023 | |
FIRST COMMUNITY BANCSHARES, INC.
RECONCILIATION OF GAAP NET INCOME TO CORE EARNINGS (Unaudited)
| | | Three Months Ended | | | Year Ended | |
| | | December 31, | | | December 31, | |
| | | 2013 | | | 2012 | | | 2013 | | | 2012 | |
| (Amounts in thousands, except per share data) | | | | | | | | | | | | |
| Net income, GAAP | | $ | 5,324 | | | $ | 8,439 | | | $ | 23,312 | | | $ | 28,577 | |
| Non-GAAP adjustments: | | | | | | | | | | | | | | | | |
| Net impairment losses recognized in earnings | | | 320 | | | | - | | | | 320 | | | | 942 | |
| Net gain on sale of securities | | | (208 | ) | | | (213 | ) | | | (399 | ) | | | (483 | ) |
| Net gain on debt prepayment | | | - | | | | - | | | | (296 | ) | | | - | |
| Merger related expense | | | - | | | | 866 | | | | 56 | | | | 5,093 | |
| Branch closure/consolidation expense | | | 1,520 | | | | - | | | | 1,520 | | | | - | |
| Prospective correction of prior period understatement | | | - | | | | - | | | | - | | | | (2,395 | ) |
| Other noncore, nonrecurring items | | | - | | | | - | | | | 1,180 | | | | - | |
| Total adjustments to core earnings | | | 1,632 | | | | 653 | | | | 2,381 | | | | 3,157 | |
| Tax effect | | | 610 | | | | 247 | | | | 889 | | | | 1,193 | |
| Core earnings, non-GAAP | | $ | 6,346 | | | $ | 8,845 | | | $ | 24,804 | | | $ | 30,541 | |
| | | | | | | | | | | | | | | | | |
| Core return on average assets | | | 0.96 | % | | | 1.29 | % | | | 0.93 | % | | | 1.22 | % |
| Core return on average common equity | | | 7.69 | % | | | 10.38 | % | | | 7.31 | % | | | 9.66 | % |
| Core return on average tangible common equity | | | 11.47 | % | | | 15.22 | % | | | 10.74 | % | | | 13.98 | % |
| Core diluted earnings per common share | | $ | 0.31 | | | $ | 0.41 | | | $ | 1.18 | | | $ | 1.50 | |
FIRST COMMUNITY BANCSHARES, INC.
EFFICIENCY RATIO CALCULATION (Unaudited)
| | | Three Months Ended | | | Year Ended | |
| | | December 31, | | | December 31, | |
| | | 2013 | | | 2012 | | | 2013 | | | 2012 | |
| (Amounts in thousands) | | | | | | | | | | | | |
| Noninterest expense, GAAP | | $ | 21,075 | | | $ | 21,733 | | | $ | 79,305 | | | $ | 78,383 | |
| Non-GAAP adjustments: | | | | | | | | | | | | | | | | |
| Merger related expense | | | - | | | | (866 | ) | | | (56 | ) | | | (5,093 | ) |
| OREO expense and net loss | | | (970 | ) | | | (312 | ) | | | (2,037 | ) | | | (1,893 | ) |
| Branch closure/consolidation expense | | | (1,520 | ) | | | - | | | | (1,520 | ) | | | - | |
| Other noncore, nonrecurring items | | | - | | | | - | | | | (1,180 | ) | | | - | |
| Adjusted noninterest expense | | | 18,585 | | | | 20,555 | | | | 74,512 | | | | 71,397 | |
| | | | | | | | | | | | | | | | | |
| Net interest income, GAAP | | | 23,092 | | | | 26,136 | | | | 91,642 | | | | 90,056 | |
| Noninterest income, GAAP | | | 7,722 | | | | 9,213 | | | | 30,542 | | | | 36,710 | |
| Non-GAAP adjustments: | | | | | | | | | | | | | | | | |
| Tax equivalency adjustment | | | 662 | | | | 658 | | | | 2,741 | | | | 2,747 | |
| Net impairment losses recognized in earnings | | | 320 | | | | - | | | | 320 | | | | 942 | |
| Net gain on sale of securities | | | (208 | ) | | | (213 | ) | | | (399 | ) | | | (483 | ) |
| Net gain on debt prepayment | | | - | | | | - | | | | (296 | ) | | | - | |
| Prospective correction of prior period understatement | | | - | | | | - | | | | - | | | | (2,395 | ) |
| Adjusted net interest and noninterest income | | | 31,588 | | | | 35,794 | | | | 124,550 | | | | 127,577 | |
| | | | | | | | | | | | | | | | | |
| Non-GAAP efficiency ratio | | | 58.84 | % | | | 57.43 | % | | | 59.82 | % | | | 55.96 | % |
FIRST COMMUNITY BANCSHARES, INC.
CONDENSED QUARTERLY BALANCE SHEETS (Unaudited)
| | | As of the Quarter Ended | |
| | | December 31, | | | September 30, | | | June 30, | | | March 31, | | | December 31, | |
| | | 2013 | | | 2013 | | | 2013 | | | 2013 | | | 2012 | |
| (Amounts in thousands) | | | | | | | | | | | | | | | |
| Cash and due from banks | | $ | 43,598 | | | $ | 47,982 | | | $ | 44,307 | | | $ | 41,467 | | | $ | 50,405 | |
| Federal funds sold | | | 1,817 | | | | 33,374 | | | | 22,876 | | | | 110,544 | | | | 66,509 | |
| Interest-bearing deposits in banks | | | 11,152 | | | | 11,219 | | | | 14,936 | | | | 15,030 | | | | 27,933 | |
| Total cash and cash equivalents | | | 56,567 | | | | 92,575 | | | | 82,119 | | | | 167,041 | | | | 144,847 | |
| Securities available-for-sale | | | 519,820 | | | | 545,676 | | | | 550,158 | | | | 537,507 | | | | 534,358 | |
| Securities held-to-maturity | | | 568 | | | | 567 | | | | 627 | | | | 816 | | | | 816 | |
| Loans held for sale | | | 883 | | | | 825 | | | | 4,621 | | | | 2,794 | | | | 6,672 | |
| Loans held for investment, net of unearned income: | | | | | | | | | | | | | | | | | | | | |
| Covered under loss share agreements | | | 151,682 | | | | 163,425 | | | | 184,076 | | | | 195,060 | | | | 207,106 | |
| Not covered under loss share agreements | | | 1,559,039 | | | | 1,533,272 | | | | 1,507,422 | | | | 1,494,232 | | | | 1,517,547 | |
| Less allowance for loan losses | | | (24,077 | ) | | | (24,665 | ) | | | (23,122 | ) | | | (24,850 | ) | | | (25,770 | ) |
| Loans, net | | | 1,687,527 | | | | 1,672,857 | | | | 1,672,997 | | | | 1,667,236 | | | | 1,705,555 | |
| FDIC indemnification asset | | | 34,691 | | | | 37,102 | | | | 40,389 | | | | 43,921 | | | | 48,149 | |
| Property, plant, and equipment, net | | | 61,116 | | | | 63,526 | | | | 64,085 | | | | 64,812 | | | | 64,868 | |
| Other real estate owned: | | | | | | | | | | | | | | | | | | | | |
| Covered under loss share agreements | | | 7,541 | | | | 7,381 | | | | 6,407 | | | | 6,911 | | | | 3,255 | |
| Not covered under loss share agreements | | | 7,318 | | | | 5,450 | | | | 4,743 | | | | 4,439 | | | | 5,749 | |
| Interest receivable | | | 7,521 | | | | 7,336 | | | | 8,010 | | | | 8,166 | | | | 7,842 | |
| Goodwill | | | 105,455 | | | | 104,892 | | | | 104,892 | | | | 104,689 | | | | 104,866 | |
| Intangible assets | | | 2,866 | | | | 2,976 | | | | 3,159 | | | | 3,344 | | | | 3,522 | |
| Other assets | | | 111,524 | | | | 112,313 | | | | 113,149 | | | | 111,409 | | | | 105,040 | |
| Total assets | | $ | 2,602,514 | | | $ | 2,652,651 | | | $ | 2,650,735 | | | $ | 2,720,291 | | | $ | 2,728,867 | |
| | | | | | | | | | | | | | | | | | | | | |
| Deposits: | | | | | | | | | | | | | | | | | | | | |
| Noninterest-bearing | | $ | 339,680 | | | $ | 353,951 | | | $ | 349,972 | | | $ | 355,918 | | | $ | 343,352 | |
| Interest-bearing | | | 361,821 | | | | 374,546 | | | | 354,862 | | | | 377,445 | | | | 353,321 | |
| Savings | | | 524,010 | | | | 527,887 | | | | 513,781 | | | | 513,322 | | | | 500,276 | |
| Time | | | 725,231 | | | | 740,181 | | | | 770,081 | | | | 800,812 | | | | 833,226 | |
| Total deposits | | | 1,950,742 | | | | 1,996,565 | | | | 1,988,696 | | | | 2,047,497 | | | | 2,030,175 | |
| Interest, taxes, and other liabilities | | | 22,770 | | | | 24,653 | | | | 23,019 | | | | 26,740 | | | | 28,816 | |
| Federal funds purchased | | | 16,000 | | | | - | | | | - | | | | - | | | | - | |
| Securities sold under agreements to repurchase | | | 118,308 | | | | 114,647 | | | | 121,204 | | | | 121,506 | | | | 136,118 | |
| FHLB borrowings | | | 150,000 | | | | 150,000 | | | | 150,000 | | | | 150,000 | | | | 161,558 | |
| Other borrowings | | | 16,088 | | | | 15,839 | | | | 15,877 | | | | 15,877 | | | | 15,877 | |
| Total liabilities | | | 2,273,908 | | | | 2,301,704 | | | | 2,298,796 | | | | 2,361,620 | | | | 2,372,544 | |
| | | | | | | | | | | | | | | | | | | | | |
| Preferred stock | | | 15,251 | | | | 15,471 | | | | 15,921 | | | | 17,421 | | | | 17,421 | |
| Common stock | | | 20,493 | | | | 20,478 | | | | 20,447 | | | | 20,343 | | | | 20,343 | |
| Additional paid-in capital | | | 215,663 | | | | 215,671 | | | | 215,139 | | | | 213,855 | | | | 213,829 | |
| Retained earnings | | | 125,826 | | | | 123,018 | | | | 120,273 | | | | 117,489 | | | | 113,013 | |
| Treasury stock, at cost | | | (33,887 | ) | | | (10,946 | ) | | | (7,763 | ) | | | (7,517 | ) | | | (6,458 | ) |
| Accumulated other comprehensive loss | | | (14,740 | ) | | | (12,745 | ) | | | (12,078 | ) | | | (2,920 | ) | | | (1,825 | ) |
| Total stockholders' equity | | | 328,606 | | | | 350,947 | | | | 351,939 | | | | 358,671 | | | | 356,323 | |
| Total liabilities and stockholders' equity | | $ | 2,602,514 | | | $ | 2,652,651 | | | $ | 2,650,735 | | | $ | 2,720,291 | | | $ | 2,728,867 | |
| | | | | | | | | | | | | | | | | | | | | |
| Shares outstanding at period end | | | 18,514,579 | | | | 19,888,028 | | | | 20,060,862 | | | | 19,985,212 | | | | 20,053,466 | |
| Book value per common share at period end(1) | | $ | 16.79 | | | $ | 16.75 | | | $ | 16.63 | | | $ | 16.93 | | | $ | 16.76 | |
| Tangible book value per common shareat period end(2) | | $ | 11.26 | | | $ | 11.60 | | | $ | 11.53 | | | $ | 11.83 | | | $ | 11.66 | |
| (1) | Book value per common share is defined as stockholders' equity divided by as-converted common shares outstanding. |
| (2) | Tangible book value per common share is defined as stockholders' equity less goodwill and other intangibles divided by as-converted common shares outstanding. |
FIRST COMMUNITY BANCSHARES, INC.
SELECTED CREDIT QUALITY INFORMATION (Unaudited)
| | | As of and for the Quarter Ended | |
| | | December 31, | | | September 30, | | | June 30, | | | March 31, | | | December 31, | |
| (Amounts in thousands) | | 2013 | | | 2013 | | | 2013 | | | 2013 | | | 2012 | |
| Allowance for Loan Losses | | | | | | | | | | | | | | | | | | | | |
| Beginning balance | | $ | 24,665 | | | $ | 23,122 | | | $ | 24,850 | | | $ | 25,770 | | | $ | 25,835 | |
| Provision for loan losses charged to operations | | | 1,528 | | | | 2,333 | | | | 3,205 | | | | 1,142 | | | | 1,220 | |
| (Recovery of) provision for loan losses recorded through the FDIC indemnification asset | | | (361 | ) | | | 812 | | | | - | | | | - | | | | - | |
| Charge-offs | | | (2,807 | ) | | | (1,955 | ) | | | (5,006 | ) | | | (2,759 | ) | | | (1,717 | ) |
| Recoveries | | | 1,052 | | | | 353 | | | | 73 | | | | 697 | | | | 432 | |
| Net charge-offs | | | (1,755 | ) | | | (1,602 | ) | | | (4,933 | ) | | | (2,062 | ) | | | (1,285 | ) |
| Ending balance | | $ | 24,077 | | | $ | 24,665 | | | $ | 23,122 | | | $ | 24,850 | | | $ | 25,770 | |
| | | | | | | | | | | | | | | | | | | | | |
| Summary of Asset Quality | | | | | | | | | | | | | | | | | | | | |
| Non-covered loans | | | | | | | | | | | | | | | | | | | | |
| Nonaccrual loans | | $ | 19,161 | | | $ | 26,397 | | | $ | 29,125 | | | $ | 30,076 | | | $ | 23,931 | |
| Accruing loans past due 90 days or more | | | - | | | | - | | | | - | | | | - | | | | - | |
| Troubled debt restructurings ("TDRs")(1) | | | 1,311 | | | | 2,228 | | | | 276 | | | | 1,596 | | | | 6,009 | |
| Total non-covered nonperforming loans | | | 20,472 | | | | 28,625 | | | | 29,401 | | | | 31,672 | | | | 29,940 | |
| Other real estate owned ("OREO") not covered under FDIC loss share agreements | | | 7,318 | | | | 5,450 | | | | 4,743 | | | | 4,439 | | | | 5,749 | |
| Total non-covered nonperforming assets | | $ | 27,790 | | | $ | 34,075 | | | $ | 34,144 | | | $ | 36,111 | | | $ | 35,689 | |
| Covered Loans | | | | | | | | | | | | | | | | | | | | |
| Nonaccrual loans | | $ | 3,353 | | | $ | 3,579 | | | $ | 3,889 | | | $ | 4,567 | | | $ | 4,323 | |
| Accruing loans past due 90 days or more | | | 86 | | | | 82 | | | | - | | | | - | | | | - | |
| Total covered nonperforming loans | | | 3,439 | | | | 3,661 | | | | 3,889 | | | | 4,567 | | | | 4,323 | |
| OREO covered under FDIC loss share agreements | | | 7,541 | | | | 7,381 | | | | 6,407 | | | | 6,911 | | | | 3,255 | |
| Total covered nonperforming assets | | | 10,980 | | | | 11,042 | | | | 10,296 | | | | 11,478 | | | | 7,578 | |
| Total nonperforming assets | | $ | 38,770 | | | $ | 45,117 | | | $ | 44,440 | | | $ | 47,589 | | | $ | 43,267 | |
| | | | | | | | | | | | | | | | | | | | | |
| Performing TDRs(2) | | $ | 10,900 | | | $ | 9,697 | | | $ | 10,927 | | | $ | 10,272 | | | $ | 6,038 | |
| Total TDRs(3) | | | 12,211 | | | | 11,925 | | | | 11,203 | | | | 11,868 | | | | 12,047 | |
| | | | | | | | | | | | | | | | | | | | | |
| Asset Quality Ratios | | | | | | | | | | | | | | | | | | | | |
| Excluding covered assets | | | | | | | | | | | | | | | | | | | | |
| Nonperforming loans to total loans | | | 1.31 | % | | | 1.87 | % | | | 1.95 | % | | | 2.12 | % | | | 1.97 | % |
| Nonperforming assets to total assets | | | 1.14 | % | | | 1.37 | % | | | 1.39 | % | | | 1.43 | % | | | 1.42 | % |
| Allowance for loan losses to nonperforming loans | | | 117.61 | % | | | 86.17 | % | | | 78.64 | % | | | 78.46 | % | | | 86.07 | % |
| Allowance for loan losses to non-covered total loans | | | 1.54 | % | | | 1.61 | % | | | 1.53 | % | | | 1.66 | % | | | 1.70 | % |
| Annualized net charge-offs to average loans | | | 0.45 | % | | | 0.42 | % | | | 1.31 | % | | | 0.56 | % | | | 0.34 | % |
| Including covered assets | | | | | | | | | | | | | | | | | | | | |
| Nonperforming loans to total loans | | | 1.40 | % | | | 1.90 | % | | | 1.97 | % | | | 2.15 | % | | | 1.99 | % |
| Nonperforming assets to total assets | | | 1.49 | % | | | 1.70 | % | | | 1.68 | % | | | 1.75 | % | | | 1.59 | % |
| Nonperforming assets to total loans and other real estate owned | | | 145.60 | % | | | 149.60 | % | | | 160.70 | % | | | 166.08 | % | | | 232.81 | % |
| Allowance for loan losses to nonperforming loans | | | 100.69 | % | | | 76.40 | % | | | 69.46 | % | | | 68.57 | % | | | 75.21 | % |
| Allowance for loan losses to total loans | | | 1.41 | % | | | 1.45 | % | | | 1.37 | % | | | 1.47 | % | | | 1.49 | % |
| (1) | Accruing TDRs restructured within the past six months or nonperforming |
| (2) | Accruing TDRs with six months or more of satisfactory payment performance |
| (3) | Accruing nonperforming and performing TDRs |
FIRST COMMUNITY BANCSHARES, INC.
SELECTED FINANCIAL INFORMATION (Unaudited)
| | | As of and for the Quarter Ended | |
| | | December 31, | | | September 30, | | | June 30, | | | March 31, | | | December 31, | |
| | | 2013 | | | 2013 | | | 2013 | | | 2013 | | | 2012 | |
| Selected Ratios | | | | | | | | | | | | | | | | | | | | |
| Return on average assets | | | 0.77 | % | | | 0.77 | % | | | 0.78 | % | | | 1.03 | % | | | 1.19 | % |
| Return on average common equity | | | 6.14 | % | | | 6.06 | % | | | 5.97 | % | | | 8.11 | % | | | 9.59 | % |
| Core return on average assets, non-GAAP | | | 0.96 | % | | | 0.92 | % | | | 0.80 | % | | | 1.05 | % | | | 1.29 | % |
| Core return on average common equity, non-GAAP | | | 7.69 | % | | | 7.19 | % | | | 6.19 | % | | | 8.23 | % | | | 10.38 | % |
| Net interest margin | | | 4.15 | % | | | 3.99 | % | | | 4.07 | % | | | 4.15 | % | | | 4.49 | % |
| Non-GAAP efficiency ratio quarter-to-date | | | 58.84 | % | | | 60.35 | % | | | 60.60 | % | | | 59.55 | % | | | 57.43 | % |
| Non-GAAP efficiency ratio year-to-date | | | 59.82 | % | | | 60.16 | % | | | 60.07 | % | | | 59.55 | % | | | 55.96 | % |
| Total equity to total assets | | | 12.63 | % | | | 13.23 | % | | | 13.28 | % | | | 13.19 | % | | | 13.06 | % |
| Average earning assets to average assets | | | 86.60 | % | | | 86.51 | % | | | 86.72 | % | | | 86.96 | % | | | 86.87 | % |
| Average loans to average deposits | | | 86.53 | % | | | 85.13 | % | | | 84.33 | % | | | 84.98 | % | | | 85.71 | % |
| | | | | | | | | | | | | | | | | | | | | |
| (Amounts in thousands) | | | | | | | | | | | | | | | | | | | | |
| Average Balances | | | | | | | | | | | | | | | | | | | | |
| Loans | | $ | 1,705,790 | | | $ | 1,694,243 | | | $ | 1,692,248 | | | $ | 1,706,296 | | | $ | 1,745,584 | |
| Investment securities | | | 535,641 | | | | 548,283 | | | | 548,101 | | | | 545,497 | | | | 519,798 | |
| Earning assets | | | 2,269,354 | | | | 2,287,785 | | | | 2,323,517 | | | | 2,350,686 | | | | 2,376,805 | |
| Total assets | | | 2,620,543 | | | | 2,644,632 | | | | 2,679,295 | | | | 2,703,029 | | | | 2,736,037 | |
| Total deposits | | | 1,971,358 | | | | 1,990,163 | | | | 2,006,626 | | | | 2,007,840 | | | | 2,036,697 | |
| Interest-bearing deposits | | | 1,625,421 | | | | 1,641,007 | | | | 1,662,446 | | | | 1,675,654 | | | | 1,699,991 | |
| Borrowings | | | 285,658 | | | | 281,250 | | | | 289,289 | | | | 309,333 | | | | 314,645 | |
| Interest-bearing liabilities | | | 1,911,079 | | | | 1,922,257 | | | | 1,951,735 | | | | 1,984,987 | | | | 2,014,636 | |
| Stockholders' equity | | | 342,912 | | | | 352,993 | | | | 365,217 | | | | 361,549 | | | | 356,812 | |
| Tax equivalent net interest income | | | 23,754 | | | | 23,017 | | | | 23,555 | | | | 24,057 | | | | 26,832 | |
FIRST COMMUNITY BANCSHARES, INC.
AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)
| | | Three Months Ended December 31, | |
| | | 2013 | | | 2012 | |
| | | Average | | | | | | Average Yield/ | | | Average | | | | | | Average Yield/ | |
| (Amounts in thousands) | | Balance | | | Interest(1) | | | Rate(1) | | | Balance | | | Interest(1) | | | Rate(1) | |
| Assets | | | | | | | | | | | | | | | | | | | | | | | | |
| Earning assets | | | | | | | | | | | | | | | | | | | | | | | | |
| Loans(2) | | $ | 1,705,790 | | | $ | 24,097 | | | | 5.60 | % | | $ | 1,745,584 | | | $ | 28,231 | | | | 6.43 | % |
| Securities available-for-sale | | | 535,074 | | | | 3,887 | | | | 2.88 | % | | | 518,982 | | | | 3,623 | | | | 2.78 | % |
| Securities held-to-maturity | | | 567 | | | | 11 | | | | 7.70 | % | | | 816 | | | | 16 | | | | 7.80 | % |
| Interest-bearing deposits | | | 27,923 | | | | 31 | | | | 0.44 | % | | | 111,423 | | | | 82 | | | | 0.29 | % |
| Total earning assets | | | 2,269,354 | | | | 28,026 | | | | 4.90 | % | | | 2,376,805 | | | | 31,952 | | | | 5.35 | % |
| Other assets | | | 351,189 | | | | | | | | | | | | 359,232 | | | | | | | | | |
| Total assets | | $ | 2,620,543 | | | | | | | | | | | $ | 2,736,037 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Liabilities | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest-bearing deposits | | | | | | | | | | | | | | | | | | | | | | | | |
| Demand deposits | | $ | 369,516 | | | $ | 66 | | | | 0.07 | % | | $ | 351,329 | | | $ | 62 | | | | 0.07 | % |
| Savings deposits | | | 521,589 | | | | 140 | | | | 0.11 | % | | | 495,116 | | | | 156 | | | | 0.13 | % |
| Time deposits | | | 734,316 | | | | 1,825 | | | | 0.99 | % | | | 853,546 | | | | 2,386 | | | | 1.11 | % |
| Total interest-bearing deposits | | | 1,625,421 | | | | 2,031 | | | | 0.50 | % | | | 1,699,991 | | | | 2,604 | | | | 0.61 | % |
| Borrowings | | | | | | | | | | | | | | | | | | | | | | | | |
| Federal funds purchased | | | 2,505 | | | | 2 | | | | 0.32 | % | | | - | | | | - | | | | - | |
| Retail repurchase agreements | | | 62,212 | | | | 25 | | | | 0.16 | % | | | 79,014 | | | | 105 | | | | 0.53 | % |
| Wholesale repurchase agreements | | | 50,000 | | | | 473 | | | | 3.76 | % | | | 58,196 | | | | 540 | | | | 3.69 | % |
| FHLB advances and other borrowings | | | 170,941 | | | | 1,741 | | | | 4.04 | % | | | 177,435 | | | | 1,871 | | | | 4.19 | % |
| Total borrowings | | | 285,658 | | | | 2,241 | | | | 3.11 | % | | | 314,645 | | | | 2,516 | | | | 3.18 | % |
| Total interest-bearing liabilities | | | 1,911,079 | | | | 4,272 | | | | 0.89 | % | | | 2,014,636 | | | | 5,120 | | | | 1.01 | % |
| Noninterest-bearing demand deposits | | | 345,937 | | | | | | | | | | | | 336,706 | | | | | | | | | |
| Other liabilities | | | 20,615 | | | | | | | | | | | | 27,883 | | | | | | | | | |
| Total liabilities | | | 2,277,631 | | | | | | | | | | | | 2,379,225 | | | | | | | | | |
| Stockholders' equity | | | 342,912 | | | | | | | | | | | | 356,812 | | | | | | | | | |
| Total liabilities and stockholders' equity | | $ | 2,620,543 | | | | | | | | | | | $ | 2,736,037 | | | | | | | | | |
| Net interest income, tax equivalent | | | | | | $ | 23,754 | | | | | | | | | | | $ | 26,832 | | | | | |
| Net interest rate spread(3) | | | | | | | | | | | 4.01 | % | | | | | | | | | | | 4.34 | % |
| Net interest margin(4) | | | | | | | | | | | 4.15 | % | | | | | | | | | | | 4.49 | % |
| (1) | Fully taxable equivalent at the rate of 35% ("FTE"). The FTE basis adjusts for the tax benefits of income on certain tax exempt loans and investments using the federal statutory rate of 35% for each period presented. The Company believes this measure to be the preferred industry measurement of net interest income and provides relevant comparison between taxable and nontaxable amounts. |
| (2) | Nonaccrual loans are included in average balances outstanding, but with no related interest income during the period of nonaccrual. |
| (3) | Represents the difference between the yield on earning assets and cost of funds. |
| (4) | Represents tax equivalent net interest income divided by average earning assets. |
FIRST COMMUNITY BANCSHARES, INC.
AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS (Unaudited)
| | | Year Ended December 31, | |
| | | 2013 | | | 2012 | |
| | | Average | | | | | | Average Yield/ | | | Average | | | | | | Average Yield/ | |
| (Amounts in thousands) | | Balance | | | Interest(1) | | | Rate(1) | | | Balance | | | Interest(1) | | | Rate(1) | |
| Assets | | | | | | | | | | | | | | | | | | | | | | | | |
| Earning assets | | | | | | | | | | | | | | | | | | | | | | | | |
| Loans(2) | | $ | 1,699,614 | | | $ | 96,768 | | | | 5.69 | % | | $ | 1,611,557 | | | $ | 96,803 | | | | 6.01 | % |
| Securities available-for-sale | | | 543,697 | | | | 15,184 | | | | 2.79 | % | | | 502,416 | | | | 15,170 | | | | 3.02 | % |
| Securities held-to-maturity | | | 667 | | | | 54 | | | | 8.10 | % | | | 2,622 | | | | 171 | | | | 6.52 | % |
| Interest-bearing deposits | | | 63,566 | | | | 211 | | | | 0.33 | % | | | 77,851 | | | | 259 | | | | 0.33 | % |
| Total earning assets | | | 2,307,544 | | | | 112,217 | | | | 4.86 | % | | | 2,194,446 | | | | 112,403 | | | | 5.12 | % |
| Other assets | | | 354,058 | | | | | | | | | | | | 316,485 | | | | | | | | | |
| Total assets | | $ | 2,661,602 | | | | | | | | | | | $ | 2,510,931 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Liabilities | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest-bearing deposits | | | | | | | | | | | | | | | | | | | | | | | | |
| Demand deposits | | $ | 361,979 | | | $ | 240 | | | | 0.07 | % | | $ | 306,019 | | | $ | 185 | | | | 0.06 | % |
| Savings deposits | | | 516,247 | | | | 584 | | | | 0.11 | % | | | 471,406 | | | | 556 | | | | 0.12 | % |
| Time deposits | | | 772,741 | | | | 7,999 | | | | 1.04 | % | | | 776,901 | | | | 9,231 | | | | 1.19 | % |
| Total interest-bearing deposits | | | 1,650,967 | | | | 8,823 | | | | 0.53 | % | | | 1,554,326 | | | | 9,972 | | | | 0.64 | % |
| Borrowings | | | | | | | | | | | | | | | | | | | | | | | | |
| Federal funds purchased | | | 632 | | | | 2 | | | | 0.32 | % | | | 490 | | | | 2 | | | | 0.41 | % |
| Retail repurchase agreements | | | 69,141 | | | | 265 | | | | 0.38 | % | | | 78,608 | | | | 449 | | | | 0.57 | % |
| Wholesale repurchase agreements | | | 51,885 | | | | 1,890 | | | | 3.64 | % | | | 55,163 | | | | 2,023 | | | | 3.67 | % |
| FHLB advances and other borrowings | | | 169,632 | | | | 6,854 | | | | 4.04 | % | | | 175,333 | | | | 7,154 | | | | 4.08 | % |
| Total borrowings | | | 291,290 | | | | 9,011 | | | | 3.09 | % | | | 309,594 | | | | 9,628 | | | | 3.11 | % |
| Total interest-bearing liabilities | | | 1,942,257 | | | | 17,834 | | | | 0.92 | % | | | 1,863,920 | | | | 19,600 | | | | 1.05 | % |
| Noninterest-bearing demand deposits | | | 342,919 | | | | | | | | | | | | 286,950 | | | | | | | | | |
| Other liabilities | | | 20,815 | | | | | | | | | | | | 25,160 | | | | | | | | | |
| Total liabilities | | | 2,305,991 | | | | | | | | | | | | 2,176,030 | | | | | | | | | |
| Stockholders' equity | | | 355,611 | | | | | | | | | | | | 334,901 | | | | | | | | | |
| Total liabilities and stockholders' equity | | $ | 2,661,602 | | | | | | | | | | | $ | 2,510,931 | | | | | | | | | |
| Net interest income, tax equivalent | | | | | | $ | 94,383 | | | | | | | | | | | $ | 92,803 | | | | | |
| Net interest rate spread(3) | | | | | | | | | | | 3.94 | % | | | | | | | | | | | 4.07 | % |
| Net interest margin(4) | | | | | | | | | | | 4.09 | % | | | | | | | | | | | 4.23 | % |
| (1) | Fully taxable equivalent at the rate of 35% ("FTE"). The FTE basis adjusts for the tax benefits of income on certain tax exempt loans and investments using the federal statutory rate of 35% for each period presented. The Company believes this measure to be the preferred industry measurement of net interest income and provides relevant comparison between taxable and nontaxable amounts. |
| (2) | Nonaccrual loans are included in average balances outstanding, but with no related interest income during the period of nonaccrual. |
| (3) | Represents the difference between the yield on earning assets and cost of funds. |
| (4) | Represents tax equivalent net interest income divided by average earning assets. |
FIRST COMMUNITY BANCSHARES, INC.
RECONCILIATION OF GAAP NET INTEREST MARGIN TO NORMALIZED NET INTEREST MARGIN (Unaudited)
| | | Three Months Ended December 31, | |
| | | 2013 | | | 2012 | |
| | | | | | Average Yield/ | | | | | | Average Yield/ | |
| (Amounts in thousands) | | Interest(1) | | | Rate(1) | | | Interest(1) | | | Rate(1) | |
| Earning assets | | | | | | | | | | | | | | | | |
| Loans(2) | | $ | 24,097 | | | | 5.60 | % | | $ | 28,231 | | | | 6.43 | % |
| Accretion income | | | 4,395 | | | | | | | | 8,160 | | | | | |
| Less: cash accretion income | | | 1,796 | | | | | | | | 2,020 | | | | | |
| Non-cash accretion income | | | 2,599 | | | | | | | | 6,140 | | | | | |
| Loans, excluding non-cash accretion income | | | 21,498 | | | | 5.00 | % | | | 22,091 | | | | 5.03 | % |
| Other earning assets | | | 3,929 | | | | 2.77 | % | | | 3,721 | | | | 2.35 | % |
| Total earning assets | | | 25,427 | | | | 4.45 | % | | | 25,812 | | | | 4.32 | % |
| Total interest-bearing liabilities | | | 4,272 | | | | 0.89 | % | | | 5,120 | | | | 1.01 | % |
| Net interest income, tax equivalent | | $ | 21,155 | | | | | | | $ | 20,692 | | | | | |
| Net interest rate spread(3) | | | | | | | 3.56 | % | | | | | | | 3.31 | % |
| Net interest margin(4) | | | | | | | 3.70 | % | | | | | | | 3.46 | % |
| | | Year Ended December 31, | |
| | | 2013 | | | 2012 | |
| | | | | | Average Yield/ | | | | | | Average Yield/ | |
| | | Interest(1) | | | Rate(1) | | | Interest(1) | | | Rate(1) | |
| Earning assets | | | | | | | | | | | | | | | | |
| Loans(2) | | $ | 96,768 | | | | 5.69 | % | | $ | 96,803 | | | | 6.01 | % |
| Accretion income | | | 15,472 | | | | | | | | 12,871 | | | | | |
| Less: cash accretion | | | 7,023 | | | | | | | | 4,158 | | | | | |
| Non-cash accretion | | | 8,449 | | | | | | | | 8,713 | | | | | |
| Loans, excluding non-cash accretion | | | 88,319 | | | | 5.20 | % | | | 88,090 | | | | 6.01 | % |
| Other earning assets | | | 15,449 | | | | 2.54 | % | | | 15,600 | | | | 2.68 | % |
| Total earning assets | | | 103,768 | | | | 4.50 | % | | | 103,690 | | | | 4.73 | % |
| Total interest-bearing liabilities | | | 17,834 | | | | 0.92 | % | | | 19,600 | | | | 1.05 | % |
| Normalized net interest income, tax equivalent | | $ | 85,934 | | | | | | | $ | 84,090 | | | | | |
| Normalized net interest rate spread(3) | | | | | | | 3.58 | % | | | | | | | 3.67 | % |
| Normalized net interest margin(4) | | | | | | | 3.72 | % | | | | | | | 3.83 | % |
| (1) | Fully taxable equivalent at the rate of 35% ("FTE"). The FTE basis adjusts for the tax benefits of income on certain tax exempt loans and investments using the federal statutory rate of 35% for each period presented. The Company believes this measure to be the preferred industry measurement of net interest income and provides relevant comparison between taxable and nontaxable amounts. |
| (2) | Nonaccrual loans are included in average balances outstanding, but with no related interest income during the period of nonaccrual. |
| (3) | Represents the difference between the yield on earning assets and cost of funds. |
| (4) | Represents tax equivalent net interest income divided by average earning assets. |
